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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
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440.0000 Property Used in Manufacturing—Regulation 1525
Annotation 440.1890
(b) Property Becoming Component Part of Finished Product
(1) In General
440.1890 Manufacturer of Prescription Medicine. A manufacturer of prescription drugs, exempt from the sales and use taxes under section 6369, requested information regarding the application of tax to certain materials some of which are physically incorporated into the finished product, and some of which are only used and consumed in the process.
The list of materials including serum, yeast extracts, and nutrients are used in the inoculation, cell growth and fermentation processes which form the bulk proteins from which the medicines are formulated. Although only minute traces of these materials are found in the finished product and are not visible, they are purchased for the principal purpose of becoming a part of the finished product and are not subject to tax.
The list of materials including buffers, separating agents, cleaning agents, agents that kill cells or detach the cells from a flask, pH control agents, and anti-foam agents are not for the purpose of incorporation into the final product, but are for use in the manufacturing process and are consumed during that process. These materials are taxable to the manufacturer, as the consumer, when the items are purchased. 2/16/93.